Apple (Apple, US: AAPL) recorded a quarterly revenue decline for the first time in three and a half years due to the suspension of production at the Zhengzhou factory in Henan, China, due to the new crown epidemic at the end of last year. The company is seeking to reduce its dependence on China for production lines. But the Financial Times, citing four sources familiar with Apple’s operations, reported that its attempts to ramp up production in India have faced setbacks.
According to sources, Apple has been sending product designers and engineers from California and China to factories in southern India to train locals and help set up production lines. Although Apple has been producing entry-level iPhones in India since 2017, it started producing flagship iPhones locally last year, and the time between production and shipment was only a few weeks behind the Chinese factory, which is seen as narrowing the gap.
Citing a person familiar with the matter, the report reported that only about half of the parts on the production line at Apple’s casing factory in southern India, run by the Tata Group, are in good condition and could be sent to Apple’s supplier Foxconn.
According to the report, compared with Apple’s “zero defect” goal, this “yield rate” of only 50% is an underperformance. The factory is developing plans to increase proficiency, but there is a long way to go, according to two people who have worked in Apple’s overseas operations.
Chinese manufacturers are quick to cut through the mess, and India is too leisurely?
Chinese suppliers and government officials often “do whatever it takes” to secure iPhone orders, the report said. Some former Apple employees described the efficiency of China, saying that they had tried to estimate that a certain task might take weeks to complete, only to find that the work had been completed at an inexplicable speed the next morning. A former Apple engineer with knowledge of the situation said that the business in India is not running at such a speed, or even “there just isn’t a sense of urgency”.
Apple’s diversification into Southeast Asia has been smoother thanks to the Regional Comprehensive Economic Partnership (RCEP), but the company’s expansion into India has been slow, partly due to logistics, tariffs and infrastructure, a person involved in Apple’s business said. .
Mark Zetter, president of Venture Outsource, an electronics foundry consultancy, said India’s inertia is a multi-year problem. He recalled that when he conducted research for the Indian think tank Gateway House five years ago, he found that local OEMs often claimed to be able to meet any needs of customers, but in fact they were slow to respond to customer concerns after signing the contract, and they were not flexible enough to respond to changes.
Apple engineers sometimes live in a hotel in the center of Chennai, the capital of the southern Indian state of Tamil Nadu, two hours away from the factory, requiring representatives to commute four hours a day with sometimes poor Wi-Fi . Apple declined to comment.
India is expected to overtake China as the country with the largest population, the mobile phone manufacturing industry, and the export potential of electronic products
Despite the aforementioned initial problems, analysts say India has huge potential for Apple. Driven by policy support and low costs, global consultancy Bain estimates that India’s manufacturing exports could more than double to more than $1 trillion by 2028 from $418 billion last year . It is estimated that the export of electronic products alone accounts for 40% of the annual growth rate.
In Apple’s earnings conference call earlier this month, the word “India” was mentioned 15 times. Tim Cook, the company’s chief executive, said he was extremely optimistic about India, describing the market as exciting and emphasizing that it is the company’s main focus. And confirmed that it will be convenient to open the first local Apple Store soon.
According to people familiar with the matter in India, Tata Group is ambitious and aims to become a full-service Apple supplier like a Taiwanese company. Its plan has been approved and supported by the Indian government.“Bloomberg” quoted sources as reporting last monthTata Group (Tata Group) is about to take over a large factory east of Bengaluru (Bengaluru) in southern India, in a deal that will make Tata India’s first local iPhone maker.
According to the report, Tata has been negotiating with Taiwan Wistron, the owner of the plant, for several months and hopes to complete the acquisition by the end of March. The negotiations between the two parties have focused on Tata acquiring a majority stake in the joint venture. Wistron, a rival of Taiwan’s Foxconn, is seeking to exit India after labor protests in 2020.
Indian electronics industry: If Apple had come five years earlier, it would have enjoyed its benefits
Meanwhile, tensions between China and India over a border dispute have led to Indian authorities banning dozens of Chinese apps and launching tax and other regulatory processes against phone makers, but despite that, sources familiar with the matter told the Financial Times , The Indian government has initially approved Apple’s Chinese component suppliers to establish a joint venture with an Indian partner and start operations. The report also mentioned that India intends to provide import tariff relief for mobile phone parts such as lenses to defend the added value of the local mobile phone manufacturing industry.
Even though the Indian authorities and even foreign companies are actively investing in the local mobile phone manufacturing industry, a senior electronics industry executive in Tamil Nadu, India, said that it is too late for Apple to enter India. If it started five years ago, it would have been earlier. Diversifying the production line is now profitable.
Source: comprehensive report
Text by FORTUNE INSIGHT
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